SIRI 7/10/2013 – A $4 Price Target?

Since gap-ups usually represent powerful moves-ups in stock charts, they usually result in support areas during any pullbacks. Sirius XM Radio (SIRI) just had a gap-up at $3.50 between 7/8/2013 and 7/9/2013 – check it out on SIRI’s 3 month daily candlestick chart below.

Sirius XM (SIRI) Gap-Up at $3.50

So since gap-ups represent powerful moves, it would then make sense that the gap-up occurs in the middle of a Wave 3 of some degree. I like to use the Fibonacci Retracement tool to give me a preliminary target to the upside. Place the first pivot point of the retracement at the bottom of the current uptrend. Next, drag the retracement tool until the 50% retracement line falls in the middle of the gap-up. In SIRI’s case, that would place the 50% retracement line at $3.50 as seen on the next 3 month daily candlestick chart.

Sirius XM (SIRI) Flashes $4 Short-Term Target

Strong moves to me are equated with Wave 3′s at some degree. Remember however, that many waves can be subdivided so right now we are looking at the short-term trend with an eye on the larger trend. So in essence what I am doing when I place the 50% retracement line in the middle of the gap-up is using the Fibonacci Retracement tool to come up with a preliminary short-term target. We will look at another estimating technique in the next SIRI update.

But for now, after placing the 50% retracement line at SIRI’s $3.50 gap-up, the top of the retracement sits at $3.97 for a short-term target.

SIRI’s chart has flashed another positive sign and that is a “Bullish Engulfing Pattern” candlestick as seen on the next 6 month weekly candlestick chart. For those not familiar with “Bullish Engulfing Patterns”, click here and then scroll down to find the pattern description.

Sirius XM Radio (SIRI) and a Bullish Engulfing Candle

There was also my prior SIRI update that indicated that the downtrend could be over. So there are a few items that indicate that SIRI could be headed towards that $3.97 short-term target as indicated by the Fibonacci technique I employed above. The only question is will SIRI try to fill the $3.50 gap before it’s potential run to $4 or after it reaches it during a market pullback? An entry point at this level appears to have some safety nets below. If a new 52 week high prints, that would be one more additional clue as to resuming the uptrend. Until next time, good luck trading.

Disclosure: I currently do not own any shares in SIRI. I am watching to see if the $3.50 gap is going to fill and may initiate a position at that time.